Excessive Fee Suit Gets Class-Action Nod

December 5, 2007 (PLANSPONSOR.COM) - A 401(k)
participant excessive fee lawsuit against a Connecticut-based
manufacturer has progressed a step through the legal process
with a ruling certifying it as a class action.

U.S. District Judge Nanette K. Laughrey of the U.S.
District Court for the Western District of Missouri
issued the ruling in a suit againstABB after determining that the plaintiffs had
presented a strong enough preliminary case that the fees
in the company’s 401(k) plan were too high.

Laughrey also asserted that the class-action
procedure was appropriate in the case because
participants’ claims were sufficiently
similar.

That means the suit now represents more than 12,000
employees
who participated in the plan sponsored by the
provider of power and automation products
and services. Also named as defendants were Fidelity Management
Trust Company and Fidelity Management & Research
Company.

Named plaintiff Ronald C. Tussey charged in the
suit that ABB and Fidelity breached their fiduciary
duties under the Employee Retirement Income Security Act
(ERISA) by allowing Fidelity Trust to steer the plan
toward expensive Fidelity funds, which, in turn, paid
Fidelity Trust for the business.

Tussey also charged that ABB and Fidelity Trust hid
the fees through a revenue-sharing program under which
Fidelity Trust would be paid a portion of its
administrative fees from funds selected by participants,
and that the revenue-sharing arrangement was not properly
disclosed.

“Taking into account the fees collected by
Fidelity Trust from the Plan directly, and the revenue
sharing Fidelity collected from the investment companies
which were selected as investment options for the Plan, a
reasonable fact finder could conclude that the Fidelity
Defendants collected excessive fees, given the national
data,” Laughrey wrote. “Because all members of
the class are interested in these excess fees being
returned to the Plan, there is clearly a common question
of both fact and law that satisfies the commonality
requirement.”

Laughrey rejected defendants’ arguments that
the lawsuit was unsuitable as a class action because
Tussey’s claims were dependent on proof concerning
each participant’s investment choices and how those
choices affected the fees charged to each
participant.

The court also turned aside arguments that Tussey
lacked proper legal standing, finding that the losses
caused by the level of plan fees occurred to the plan and
not a single participant.